INTL FCStone 2011 Annual Report Download - page 43

Download and view the complete annual report

Please find page 43 of the 2011 INTL FCStone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 142

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142

INTL FCSTONE INC.Form10K 29
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
INTLFCStoneInc. and its consolidated subsidiaries (“we” or
the “Company”) form a nancial services group employing 904
people in o ces in twelve countries. e Company’s services
include comprehensive risk management advisory services for
commercial customers; execution of listed futures and options on
futures contracts on all major commodity exchanges; the sale of
structured over-the-counter (“OTC”) products in a wide range
of commodities; physical trading and hedging of precious and
base metals and select other commodities; trading of more than
130 foreign currencies; market-making in international equities;
and debt origination and asset management.
e Company provides these services to a diverse group of more
than 20,000 customers located in more than 100 countries,
including producers, processors and end-users of nearly all
widely-traded physical commodities; commercial counterparties
who are end-users of our products and services; governmental
and non-governmental organizations; and commercial banks,
brokers, institutional investors and major investment banks.
As discussed in Item6- Selected Financial Data, U.S. GAAP
requires the Company to carry derivatives at fair value but
physical commodities inventory at the lower of cost or fair value.
ese requirements may have a signifi cant temporary impact
on our reported earnings. Under U.S. GAAP, gains and losses
on commodities inventory and derivatives which the Company
intends to be off setting are often recognized in diff erent periods.
Additionally, in certain circumstances, U.S. GAAP does not
require us to refl ect changes in estimated values of forward
commitments to purchase and sell commodities. For these
reasons, management primarily assesses the Company’s operating
results on a marked-to-market basis. Management relies on these
adjusted operating results to evaluate the performance of the
Company’s commodities business segment and its personnel,
as well as the overall Company. Additionally, the Company
focuses on mitigating exposure to market risk, ensuring adequate
liquidity to maintain daily operations and making non-interest
expenses variable, to the greatest extent possible.
Fiscal 2011 Highlights
•
Record operating and adjusted operating revenues of
$423.2million and $414.8million, respectively.
•
Fiscal year2011 average customer segregated assets on deposit
of $1.8billion, a 61% increase over fi scal year2010.
•
Successful completion and integration of the acquisitions of
Hencorp Futures, Ambrian Commodities Limited and certain
assets of Hudson Capital Energy,LLC.
•
Secured London Metals Exchange Category Two membership.
•
Opened new offi ces in Shangai, China; Asuncion, Paraguay;
Maringa, Brazil; and Porto Alegre, Brazil.
•
Fiscal 2011 OTC contract volumes increased 126%, from
fi scal2010.
•
In October2010, completed the replacement of a one year,
$75.0million syndicated committed loan facility, with a
$75.0million three year syndicated committed loan facility,
which was subsequently increased to $85.0million in
September2011.
Recent Events Aff ecting the Financial Services Industry
On October31,2011, MF Global HoldingsLtd. (“MF
Global”), the parent company of the jointly registered futures
commission merchant and broker-dealer, MF GlobalInc.,
fi led a voluntary petition for relief under Chapter 11 of the
UnitedStates Bankruptcy Code. e Company has no material
exposure to MF Global. e Company has two wholly owned
subsidiaries which introduced customers to MF GlobalInc.
Following the bankruptcy fi ling, the CME GroupInc. selected
FCStone,LLC as one of fi ve FCM’s chosen to transfer blocks of
MF Global customers to. During this process, FCStone,LLC has
opened accounts for the customers of these introducing brokers
and completed the transfer of their positions. In conjunction
with the block transfer and during the subsequent period, the
Company has opened over 2,300 new accounts for former MF
Global customers.
In addition, on November25,2011, the Company arranged
with the trustee of MF Global’s UK operations to acquire
the Metals Division of MF Global UK Limited (in special
administration). As part of the arrangement, the Company has
received assignment of customer accounts and customer account
documentation. Additionally, the Company has hired more than
50 professional staff based in London, NewYork, Hong Kong
and Sydney from MF Global’s metals trading business based in
London. e Company anticipates that a substantial number
of the customers of this metals trading business, which serves
institutional investors and fi nancial services fi rms in the Americas,
Europe, and the Asia-Pacifi c region, will elect to become active
trading customers of the Company. As part of this transaction,
INTLFCStone (Europe) has received approval from the London
Metals Exchange (“LME”) to upgrade its LME Category Two
membership to a LME Category One ring dealing membership.